Potential Impacts of Map Changes on Flood Insurance and Options
When new flood maps are released, residents and business owners may find that their flood risk is higher or lower than previously thought; others may see no change. And some may be required to carry flood insurance, while others will no longer be required. Once you have identified how your flood risk has changed, it is important to then know how it may affect the requirement and cost of flood insurance. Below are different scenarios which may occur and what options there are to reduce any financial impact.
Newly Identified as High-Risk from Moderate-Low Risk
For property owners and renters that are newly identified as being in a high-risk flood area from the moderate- to low- risk flood area, the National Flood Insurance Program (NFIP) offers a one-time cost-saving option called the Newly Mapped Discount.
If there is a federally backed loan on the property, the federal mandatory purchase requirement applies. As a result, most lenders will require flood insurance. Property owners and renters previously designated in Zones B, C, X, D, A99 or AR and newly identified to be in a Special Flood Hazard Area (e.g., Zone A, AE), and whose policy is effective within 12 months of the effective date of the new map, may be eligible for a one-time Newly Mapped Discount.
Upon renewal, policy rates will then gradually increase until they reach their full-risk rate. If the property is sold, the discounted policy can be transferred to the new owners. Property owners must maintain continuous coverage to keep their Newly Mapped discount and glidepath.
Increase or Decrease in Base Flood Elevation
Some property owners and renters may be in an area where the Base Flood Elevation (BFE) increases or decreases. With FEMA’s new flood insurance rating program (Risk Rating 2.0, or RR 2.0), flood zones and BFEs are no longer a rating variable. This means there would be no change in premium due to the increase or decrease in BFE.
Newly Identified as Moderate-Low Risk
When being remapped from a high-risk zone (e.g., Zone A) to a moderate-low risk zone (e.g., Zone X), there will be no change in premium due to the change in flood zone. However, the mandatory purchase requirement is removed, so lenders are no longer required to have borrowers carry flood insurance. Note that lenders always reserve the right to require it.
Property owners are still encouraged to carry flood insurance since the risk is only reduced, not removed. More than 30% of flood claims in Arizona come from policyholders in moderate-low risk flood zones. You need to protect the life or business you’ve built.
